New gTLD registry XYZ.com has responded to criticisms of its plan to auction .xyz and .college names with NameJet before they even have signed contracts with ICANN.

CEO Daniel Negari told DI that the plan to auction 40 names between now and the end of February, is “comfortably within the rules”.

The company seems to be operating at the edge of what is permissible under the new gTLD program’s rights protection mechanisms, which state that no domains may be allocated prior to Sunrise.

But Negari said in an email interview that nothing will be “allocated” before its Sunrise periods are done:

the buyers at auction are not buying the domain names as in a normal auction. They are buying an option to force us to allocate them the domain after the Sunrise Period for the auction price assuming various contingencies are met — such as us being able to allocate the name in the future, the name being available after sunrise, the name not being blocked-out because of name collisions and so on.

He went on to say that the 40 names being put to auction are being drawn from the 100 names the recently redrafted Registry Agreement says registries are allowed to allocate to themselves “necessary for the operation or the promotion of the TLD”.

There’s also the potential problem that neither TLD has yet received its list of name collisions, which are likely to contain thousands of strings that the registry must block at launch.

As we’ve seen with the gTLDs that already have their lists, many desirable second-level strings are likely to be blocked, which could clash with names XYZ is planning to auction.

But XYZ seems to have access to the Day In The Life Of The Internet data from which these lists are compiled, and Negari said that the names it is auctioning off do not appear.

“We think these auctions are a great way to both promote our TLD as anticipated by ICANN in the RA and to bring increased innovation to the space in line with ICANN’s stated goals for the new gTLD program,” Negari said.

As far as I know .XYZ and .College do not even have a signed agreement with ICANN.

The auction states –

“In an advance auction, the highest bidder purchases an option to acquire the domain at the winning price, taking possession of the domain when it becomes available from the registry after the Sunrise period.”

When exactly is that? There is no timeline provided.

It also says nothing about renewal cost. Is the winning bid a one time cost for permanent ownership? If not how much are the renewal fees?

There are several issues with selling products that do not actually even exist. What if for some unknown reason one of these extensions is not delegated or a specific domain cannot be assigned? Is the money refunded?

This is before the sunrise, this is before collisions have been assigned. No domains should be able to be sold before a contract with ICANN is even signed.

Both NameJet and the registry could both be held accountable if there is an issue.

I think ICANN really needs to step in here. I don’t see how this is within ICANN rules regardless of what Daniel Negari says.

“There are several issues with selling products that do not actually even exist.”

There are no issues entering contracts which are subject to contingent provisions.

People buy houses on such propositions every day. If a house is under contract from the seller to a buyer, it is utterly mundane and common for me to enter into a contract to buy the house from the seller at a stated amount, subject to the contingency that the presently-contracted buyer fails to perform.

When did it become illegal, immoral, or unethical to enter into contracts for which performance is contingent on events or conditions which have not been determined?

There is a man in Chicago selling options on contracts to deliver pork bellies at a stated price in May of next year. Maybe pork bellies will sell at that price in May, and maybe they won’t. Maybe the entire state of Iowa will be gripped with some fatal porcine syndrome in March, and there will be no pork bellies in May. Nonetheless, the price of that option contract for May delivery of pork bellies is updated online by respectable brokerages every 15 minutes or so.

So, Daniel Negari starts the TLDs races with a clown suit on, just like the rest of the pump and dump figureheads have done over the years with other wonderful extensions like .mobi, .biz, .travel, etc….

He’s a real rule bender in my opinion. It shows how this is all about him and not the public.

I’d almost bet he calls it all off if this auction fails. Why wouldn’t anyone if a no-show happens? Cut some losses on a loser extension.

Hey, I was thinking the same, and not sure what name would even go good with that, but when i searched google for “xyz”, I got “About 20,100,000 results”, and that is not bad. If you look at the site, http://www.XYZ.com, you will notice that he started it after people were asking for .xyz.com and @xyz.com addresses. So he may be on to something here.

While taking no formal position on this service. I share some of the same reservations expressed by Jeff Neuman in your original posting. Perhaps it is our work with gTLD registry operators over the last decade which perhaps colors our perspective. I know my experience with Employ Media and the breach notice which ICANN sent to them after formally approving a RSEP service was a particularly insightful.

Regardless of what opinions various individuals may have, the one positive outcome as a result of your article is that ICANN will be forced to take a position on this service. Fadi was beating the drum on Compliance during the IGF touting the increased head count in compliance.

So we will shortly find out if this service is “comfortably within the rules” or if this is more of an edge case. Regardless of the outcome, the clarity as to the legality of this service under the baseline registry contract will be important. Let the innovation continue.

What me, you or Jeff think is totally irrelevant. However, I will note that I think your analogy of SnapBacks is not on all fours with the current situation. Snapbacks was originally a service offered through a network or competitive registrars, it was not a “registry service” as defined by Section 2.1 of Specification 6 of the current registry agreement. Now when the WLS was finally approved as a registry service by ICANN in 2004, the entire marketplace had changed with registrars largely not deleting names or offering their own premium services.

Again what we think is largely irrelevant. What is relevant are the actions ICANN takes when critics of the new gTLD program take to the mic in BA next week. Knowing ICANN staff they will just punt and say we will address this situation with the Registry Operator during contractual negotiations.

How ICANN will eventual pass judgment on this issue will be largely determined by their definition of the word “allocate.” Give the potential for some registration authorities to creatively define “allocate” will likely result in ICANN taking a strict definition. But then again that is just my humble irrelevant opinion and NOT what Maguy and her team think.

I am sure her growing team of compliance people are busy briefing the issue as we exchange our pleasantries, notwithstanding the fact that they do not even have a signed registry agreement yet.

The point is, Mike, provided that a contract takes into account all relevant contingencies, I don’t see how any compliance issues are implicated.

A TLD applicant can, right now, negotiate a lease on office space for their operations with a building owner. If the parties to that contract are agreeable, then the building owner and the registry can agree to make the rent contingent on whether the TLD applicant gets to operate a TLD. That contingency does not somehow render that lease to be within the purview of “ICANN compliance”.

What matters, as far as “compliance” is concerned is (a) if the TLD applicant is delegated a TLD, then (b) does the allocation of names comply with the relevant rules – i.e. does it have accurate WHOIS, did the TLD run a proper sunrise first to allocate names to TMCH record owners who applied for a name in that TLD, (c) was the name allocated through an accredited registrar, and so on.

We went through this exercise back in 2001. Were there pre-registration scams? Absolutely. But the existence of pre-registration scams does not render every contract – contingent on the name being available by general registration launch, and after sunrise – providing a prospective contingent interest in a name, to be a scam.

Again, yes there are pre-registration scams. Those are distinct from legitimate “best efforts, if the TLD is delegated and the name is available subject to every pertinent ICANN requirement” contingent contracts. Now, whether any such contracts constitute a good value is entirely subjective, but it is the same proposition on which, for example, TLD applicants have sold shares of stock in their enterprise.

It might be more productive to point out specifically what provision of any relevant ICANN policy would be violated by a proper contingent contract arrangement. I do agree, as a matter of fair play, that all relevant contingencies should be clearly stated, but I’m fascinated at how this topic is always a lively one.

As far as “addressing the topic through contractual negotiations”, I remain mystified as to why it would be. Some of the new TLD applications are expressly clear that names might be delegated by non-FCFS mechanisms similar to the ICM Registry “Founder’s Program”, RFP’s, and other sorts of beauty pageants and auctions. These types of things are already baked-in to TLD applications which were passed. If a prospective applicant is fully informed of all relevant contingencies, I am hard pressed to understand why it matters when the auction is conducted. So, I have to come back to, “What ICANN Policy or Rule are we talking about here?”

To be clear, let’s propose the following:

Mike, for $100 I will assign palage.xyz to you upon the launch of general registration in .xyz, provided:

(1) .xyz is delegated as a TLD,
(2) palage.xyz is not allocated to a TMCH record holder during sunrise, and
(3) “palage” does not appear on any ICANN list of names required to be reserved or non-registrable
(4) the registration of palage.xyz is made through an ICANN accredited registrar and made subject to all applicable policies bearing on a .xyz domain name.

The only thing my limited imagination can see is worth debating in that proposition is whether it is worth $100. But that is an utterly subjective proposition. Please cite, chapter and verse, what else I should consider in that proposition.

(If it is a matter of curiosity, I am not engaged by any party which is contemplating any sort of pre-registration arrangement, nor am I engaged by any existing registry operator who might have an interest in re-delegation of a new TLD from an operator deemed non-compliant. (insert accusatory throat-clearing sound here))

While I still take no position on the legality of this service for the purposes of this response allow me to assume the role of an ICANN compliance staff representative 🙂

Dear Mr. Negari,

In response to Question 18(c) you stated in your application that “The ICANN-mandated Sunrise period open to TM holders will precede a Landrush or Premium Name availability period during which applicants are able to register their interest for various domain names (in the event of conflicting requests, the names will be sent to auction).”

Can you please explain how the “availability” of premium names in advance of ICANN-mandated Sunrise period is consistent with the representations which you made in your application?

In addition could XYZ.COM LLC please identify the text in Question 23 Registry Services where these “conditional” and/or “provisional” registrations services are specifically enumerated as a registry service in your application.

Sincerely,

……

Just to be clear here John over the years I have worked directly with registries to help innovate new roll-out options (aka innovation). I worked with .MOBI and their Premium Name services including provisions with WIPO to vet any problem reservations. I also worked with Edmond in connection with .ASIA’s Pioneering program. These programs were the bedrock upon which ICM Founder’s program was based. The problem is that was then, this is now.

The inflexibility of ICANN to specifically address many of these issues during the final approval of the template agreement is a concern. Unfortunately some registries will just have to pay the price to help set the precedent. Just ask the people at Employ Media how ICANN compliance interpreted application language to superseded the specific provisions in the executed registry agreement.

The word “allocated” has a defined meaning in the TMCH requirements. A promise made prior to Sunrise, to allocate a name if it remains available post-Sunrise, is not an “allocation” of a domain name as defined in this program. It is simply a contract to perform services at a future date, contingent on events between now and then.

Not wanting to weigh into the broader debate, I don’t think this is correct. The relevant language in the RPM requirements defines “Allocate” as “allocate, assign, designate or otherwise earmark” which strikes me as being pretty broad. It’s not clear how the contract to provide services for a specific SLD for a specific future registrant wouldn’t be designating or earmarking the domain.

If I say, “Jordyn, if Hoof Hearted wins in the 4th race at Aqueduct, I will give you a bottle of wine from my cellar” then I certainly have not assigned the bottle to you. I may be obligated to assign it to you upon satisfaction of the contingent event, but at present you have no realized interest in that bottle.

ICANN appears to have issued a registry contract with full knowledge of the launch plan terms, however.

If it’s one particular bottle from your cellar and you’re not going to promise to give it to anyone else, I think it’s fair to say you’ve earmarked it for me.

I’d also guess that ICANN wouldn’t agree that entering into a contract that prohibits certain business plans of a registry operator after being informed that the registry operator would like to engage in those practices means that they’re providing tacit approval. What’s allowed by the contract is what the contract says is allowed, and not what people say they’re going to do outside of that context. I’m not a lawyer, so you’d have to tell me if estoppel or somesuch comes into play here, but it strikes me as a fairly aggressive approach that ICANN may decide isn’t allowed by the contract.

@Mike, the answer to the hypothetical compliance question is pretty simple.

“Can you please explain how the “availability” of premium names in advance of ICANN-mandated Sunrise period is consistent with the representations which you made in your application?”

It is consistent with the provisions of the Sunrise period, as no names will be allocated to any registrant in advance of allocations made during the ICANN-mandated Sunrise period.

You don’t seem to be reading the terms of the hypothetical I posted:

“Mike, for $100 I will assign palage.xyz to you upon the launch of general registration in .xyz, provided:

(1) .xyz is delegated as a TLD,
(2) palage.xyz is not allocated to a TMCH record holder during sunrise, and
(3) “palage” does not appear on any ICANN list of names required to be reserved or non-registrable
(4) the registration of palage.xyz is made through an ICANN accredited registrar and made subject to all applicable policies bearing on a .xyz domain name.”

Look at contingency #2. The mandated Sunrise requirement is right there, in black and white.

I did look at contingency #2 as well as read the original description of the service where it was stated that these names being auctioned were coming from the Registry list of 100 names “necessary for the operation or the promotion of the TLD”.

However, what we have here is the Registry Operator placing a set of names which it intends to auction at a premium on its reserve list which by default preclude that name from being allocated to any trademark holders during Sunrise.

So when JOBS S.p.A owner of CTM registration 006005482 registers in the TMCH and then finds that his trademark has been reserved by the Registry for its promotion/operation, but this reservation is merely temporary for the purposes of auctioning it to a third party I could see the intellectual property community being a bit concerned about potential gaming.

John you and I have discussed previously how creative people in this industry seek to circumvent the rules, aka Game the System. So while I again have no problems with registries using innovative solutions to optimize key resources to help build brand/consumer awareness, I am worried about how some registration authority actors have a predisposition for pushing the envelope to the detriment of the industry.

When you look at Donut’s DPML list, this is only possible because there is no limit on the size of a Registry’s reserve list, although there is a limit of 100 domain names which a registry may activate in its name. The fact that Donuts will be making millions off names which it will be reserving and not paying ICANN a dime since this reservations do not constitute a domain name reservation is its own bit of irony. See 3.3 of Specification 5.

Where things get interesting is where an innovative Registry Operator decides to combine these services. For example, Registry Operator decides to reserve from registration 20,000 words under section 3.3 of Spec 5. After the Sunrise Period has concluded, Registry Operator begins to active 50 of these domain names in its name for purpose of auctions to third parties.

In theory one could even wait until the Claims Notice period has lapsed. I have not looked into the latest and greatest requirements on what notices the TMCH must provide (if any) to trademark owners in this scenario.

I would not want to be the ICANN staff person that approved this service, when the Intellectual Property advocates press ICANN on how they allowed these critical RPMs to be knowingly circumvented by a Registry Operator.

My point in this exchange was not to limit Registry Operators in how they can best market and promote their respective TLDs but to stress how external factors (gaming, etc.) can cause ICANN to change its mind after representing one thing to a registry operator.

This is my last post on this subject, so you can have the last word John.

XYZ.COM, the Internet registry operator behind the new .xyz domain names, has signed its registry agreement with ICANN, paving the way for the new generic domain extension to launch in Quarter 2 of 2014.